As credit loans for mid-credit borrowers expand, experts advise managing their borrowing scale to ensure it does not exceed their repayment capacity.
Hyungseok Lim, a senior research fellow at the Korea Institute of Finance, stated in his report "Recent Characteristics and Implications of Credit Loans for Mid-Credit Borrowers" on the 8th that the proportion of credit loans for mid-credit borrowers (based on new loan amounts) increased from 17.6% in the second quarter of 2021 to 26.2% in the first quarter of this year.
Mid-credit borrowers refer to borrowers in the lower 20-50% of individual credit scores.
Looking at the scale of credit loans for mid-credit borrowers, as of last year, 75% of mid-credit borrowers borrowed 20 million won or less.
The average borrowing interest rate for mid-credit borrowers was 9.5%, and three-quarters of all mid-credit borrowers were applied an interest rate of 11.9% or less.
In terms of the financial companies from which mid-credit borrowers borrowed money, banks (41.3%) and specialized credit finance companies such as credit card and capital companies (45.05%) showed relatively high figures as of the first quarter of this year.
The overall average debt service ratio (DSR) for all mid-credit borrowers was only 26.6%, but it is estimated that 1 out of 4 mid-credit borrowers exceeded a DSR of 37.3%.
Senior research fellow Lim emphasized, "Mid-credit borrowers need to be careful not to exceed their repayment capacity," and "Financial institutions should strengthen their efforts to discover new mid-credit borrowers while enhancing their risk management capabilities to prevent the deterioration of loan soundness."
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The proportion of credit loans for mid-credit borrowers increased from 17.6% to 26.2%... "Repayment capacity management needed."
As credit loans for mid-credit borrowers expand, experts advise managing their borrowing scale to ensure it does not exceed their repayment capacity.Hyungseok
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